Obama Administration to Seek New Power for SEC on Executive Pay

Robert Schmidt and Rebecca Christie Robert Schmidt And Rebecca Christie
Wed Jun 10, 11:34 am ET
June 10 (Bloomberg) -- The Obama administration will seek new powers for the Securities and Exchange Commission to force firms to let shareholders vote on executive pay and make directors who set compensation more independent, an administration official said.
Today’s proposal, subject to congressional approval, would cover all public companies. President Barack Obama has long supported giving shareholders nonbinding votes on bonuses, salaries and severance packages. The administration also will name a “special master” to monitor compensation plans for firms receiving exceptional assistance in the financial rescue.
The changes are aimed at reducing systemic risks and quelling a political uproar over bonuses paid to executives whose companies were bailed out by the government. Treasury Secretary Timothy Geithner has repeatedly blamed pay standards tied to short-term profits for contributing to the worst financial crisis since the 1930s.
“It clearly is going to force companies to be more transparent with their disclosure” on compensation, said Irv Becker, national practice leader for Philadelphia-based Hay Group’s executive compensation practice. If the measure is implemented, it likely will take several years before shareholders begin to confront management, he predicted.
“It’ll kind of be novel the first year, maybe the first two, and then likely be a little bit more serious in future years,” said Becker, a former head of compensation and benefits at Goldman Sachs Group Inc.
Treasury Meeting
Geithner is scheduled to meet today with SEC Chairman Mary Schapiro, Federal Reserve Governor Daniel Tarullo and executive- compensation specialists at the Treasury.
The Treasury chief said yesterday that the Fed and other bank regulators will define “standards and principles that supervisors would use to help bring about reforms in compensation practices in the financial industry.â€
“A centerpiece of sensible reforms will be to tie compensation to better measures of long-term investment and return, and to adjust them to reflect the riskâ€
Changing executive pay practices is part of a broader initiative by Obama to overhaul U.S. financial rules in the aftermath of the crisis. Obama will unveil his “series of specific proposals” streamlining and reorganizing regulation on June 17, White House spokesman Robert Gibbs said.